CHD and the Law: Hospital Mergers, Part 2

This blog series features stories involving congenital heart disease and the law. The blog posts may discuss contemporary or historical court decisions, laws or regulations, or other legal issues that relate directly or indirectly to CHD. These posts are purely for entertainment and educational purposes and are not legal advice. Any opinions expressed in this series of posts are solely those of the author and do not represent the Adult Congenital Heart Association.

This is the second part in a two-part series about hospital mergers; the first part can be read here.

From yesterday's post:
Now, what does all of this (background about mergers and the Department of Justice [DOJ] Antitrust Division) have to do with congenital heart defects, you may ask?

The answer: a whole lot. Adults with congenital heart defects are big users of our nation’s healthcare system. We have more surgeries and procedures, go for more check-ups, and require more frequent and complex testing. And if the healthcare market lacks healthy competition, healthcare costs skyrocket—as do insurance premiums, deductibles, and copayments. As I saw firsthand with my hospital, the antitrust laws don’t only regulate theoretical pants megastores but also regulate hospitals and the entire healthcare industry.

The DOJ objected to the North Shore-LIJ merger because they were the only two “anchor” hospitals on Long Island. Anchor hospitals, according to expert testimony, are those with broad ranging and highly sophisticated services—for example, programs designed to care for adults with CHD. The DOJ was worried that a merger between the only two anchor hospitals in the region would reduce competition in specialized medical markets. The DOJ was worried that this merger would allow North Shore-LIJ to raise its prices on specialized healthcare services, and everyone who wanted to go to an anchor hospital on Long Island would have no choice but to pay the higher prices.

North Shore and LIJ rebutted with two main arguments. First, they argued that their merger would actually allow them to cut costs. With a larger company, they could reduce costs by centralizing purchasing, standardizing products, and combining administrative departments. Second, they argued that there were over 10 other general care hospitals in the region, which would guarantee the continued presence of a competitive marketplace.

Ultimately, the court found North Shore-LIJ’s arguments to be persuasive and permitted the merger. The court felt that it was unlikely the merger could have serious anticompetitive effects (like higher prices) because there were so many other hospitals in the region.

What the court did not discuss in depth was the fact that these other “non-anchor” hospitals failed to provide most forms of specialized care. As a result of the merger, North Shore-LIJ became the only hospital on Long Island to have an ACHD clinic. Competition? You tell me.

Although the DOJ wasn’t able to prevent this merger, in other instances they have been successful.

So in the end, I’ll leave the question to you. Are hospital mergers a good thing or a bad thing? On the one hand, larger hospitals can share resources and overhead to cut costs. Hopefully, if they have lower costs, they won’t need to charge quite so much. On the other hand, hospital mergers eliminate or reduce competition within a region. When there are lots of different hospitals, patients and insurance companies can shop around to find the best services for the best price. This forces hospitals to keep their prices competitive. Hospitals claim that their mergers allow them to save money and lower their prices, but an open market may be a better way to keep prices low for patients like us. Who is right? I’ll let you decide for yourself.

The facts discussed in this case came from United States v. Long Island Jewish Med. Ctr., 983 F. Supp. 121 (E.D.N.Y. 1997).